Custodia Bank on Friday filed an additional complaint against the Federal Reserve, weeks after the Fed denied the bank's request to open a "master account" and become a member of the Federal Reserve System.
The Wyoming Special Purpose Depository Institution claimed that the Federal Reserve Board, in collaboration with the Biden administration, had planned a series of public statements to accompany the denial of Custodia's application and that the Kansas City Fed was not "pulling the strings."
Custodia's application for a master account was denied "shortly" after the Federal Reserve turned down her bid to join the Federal Reserve System at the end of January. The filing stated:
“Defendants had a non-discretionary duty to grant Custodia’s master account application and not to discriminate against Custodia in its ability to access all bank services using that account. Any other outcome eviscerates the dual-banking system that has served our nation since its founding,”
In its initial lawsuit, filed last year, Custodia claimed that the Fed had failed to meet a deadline set by law to decide on its request for a master account. The filing on Friday stated:
“Confronted with discovery requests to the Kansas City Fed and a looming deadline for the Board to produce an administrative record that would have revealed the Board’s control over the Kansas City’s Fed’s decision-making process, Defendants tried to moot the litigation. On January 27, 2023, in a coordinated maneuver orchestrated by the Board in consultation with the White House and leaked to reporters by Board officials the day before it occurred, the Kansas City Fed reported the denial of Custodia’s master account application immediately after the Board denied Custodia’s membership application,”
As the Act states that Fed services "must be provided to nonmember depository institutions," the complaint argues that the Fed cannot deny Custodia's application. Custodia spokesperson Nathan Miller issued the following statement:
“Custodia Bank today continued its ongoing lawsuit against the Federal Reserve Board of Governors and Kansas City Federal Reserve Bank by filing an amended complaint that zeroes in on the core legal issue: whether Congress even granted the Fed discretion to decide master accounts at all.”
The amended lawsuit was filed on the same day that Custodia founder Caitlin Long tweeted that she had alerted law enforcement to "probable crimes" committed by an unnamed cryptocurrency company prior to its collapse and cautioned regulators about the dangers of bank runs associated with cryptocurrencies.